Moving from Employee to contractor

Rainmann

Hello!

I have been working as an employee at the same company for over 7 years and because of a move I am making abroad I need to be set up as a contractor. My employer will be getting in touch with a proposed day rate and then I can start any negotiating with them. From my research a 30% premiums seems to be the norm but this will vary depending on benefits etc. Having done the calculations including annual/sick leave, pension, health insurance I am getting 25% higher. However, I am wondering if I might be missing something. One thing that comes to mind is Employer PRSI - As I will no longer be an employee, this wont be a cost for my employer but I will need to start paying the equivalent social security in the place I am moving to. Is it common practice to factor this in to the day rate calculation too?

I am planning to speak with an accountant for further advice in a couple of weeks, but any thoughts/ experiences would be appreciated.

Thanks!

Mrs OBumble

Who is moving overseas, you or the company?

Rainmann

https://www.boards.ie/discussion/comment/119988403#Comment_119988403

I am moving overseas.

Mrs OBumble

Have you taken tax advice in the place where you are moving to?

In many cases employer PRSI is no longer relevant- but local tax and welfare obligations are.

If you are moving to an EU country you also need to research what it takes for you to live there legally. (Freedom of movement allows you to take up employment, not self-employment. )

You also need to consider currency risks: you will presumably be paid in euro, which may rise or fall in value compared to where you are living.

In Ireland, all things considered, a contractors hourly rate needs to be roughly twice that of a contractors.

Vestiapx

Where are you moving? Is the cost of living better or worse than here, I'd love to move to Spain and get a contractor rate of equal to what I make. Moving you to contractor rate is a plus for the employer but if it's you that is moving and you that needs to become a contractor I'd be offering you 20% as my saving on holidays and sickpay and telling you to invoice me at the end of each month.

30% seems steep considering it's your idea and 100% is dream world stuff.

Rainmann

https://www.boards.ie/discussion/comment/119988494#Comment_119988494

Yeah, fair points. I am actually moving to Spain and yes it is my idea. To be honest, the position I am in, I do have some leverage so I think I will be able to negotiate regardless of it being my idea. I get your point around just offering the 20% and a few years ago I would have jumped at that, but I will at least try and get the upper limit of whats possible and then negotiate from there.

Rainmann

https://www.boards.ie/discussion/comment/119988462#Comment_119988462

Thanks for the response. I am moving to Spain. I have had calls with Accountants there and the PRSI is relevant from what I was told. They call it Social Security or something like this and its 5-6K per year so given my employer was previously paying this I was thinking this should be factored in as it is part of their current cost.

I wish twice was on the table but I think that going to be out of reach. 30-35% would be what I am hoping for.

When you go contracting you have no guaranteed future in that job, your contract could be terminated the next day. Unless you are very lucky you will take a period of 2 or 3 months to find another contract, so factor that into your calculations too. Double a permanent salary is about right.

Mrs OBumble

Luckily Spain does allow self employed EU passport holders to be resident.

But you will need to plan carefully around your legal and tax obligations: this is one guide, that Google suggested I don't know if its good quality info but ar least it gives the flavour of the issues involved.

https://housinganywhere.com/Spain/freelance-in-spain

Vinnymcdonnell

https://www.boards.ie/discussion/comment/119989380#Comment_119989380

Totally wrong, contractor will generally sign a yearly contract that will have a months notice generally in it. So if they are terminating the contract you will have a months notice.

The rate is also incorrect, generally the rate is just under 1.5 Times salary costs, so say you are on a €100k salary over 48 Weeks would be say just under €2,100 a week or say €52.50 P/H, so as a contractor would want say €79 P/H or €3,160 Week.

Also if you are working from Spain and invoicing to Ireland, will be 0% Vat rate charge along with setting your company up in Spain. Could be tricky if you plan on going as a contractor based in Ireland and moving to Spain.

https://www.boards.ie/discussion/comment/120013280#Comment_120013280

Its not "totally wrong". I've had a week, a month and a days notice in contracts from various clients. Frequently my notice to them is longer than theirs to me. I've had contracts that are scheduled for a year, 6 months and 3 months, but if your notice is 1 month then signing a years contract is fairly meaningless anyway. Basically, your contract and notice is what they say it is.

Donald Trump

https://www.boards.ie/discussion/comment/120014255#Comment_120014255

Would be a pain in the arse to get a contractor in to do a quoted 3-week job, find out he was a spoofer and can't do it, and then have to give him a months notice

Would it not be relevant to point out that one thing the OP is giving up is any accumulated benefits as regards redundancy etc